American Needle Could Get Between Nike And NFL

As a consumer of NFL merchandise, I think it is great that the NFL and Nike were able to put together a five year deal, which makes Nike the official uniform provider of the NFL beginning in April 2012. Nike makes a fantastic product, which is tough for other large companies to match. But as a lawyer, I wonder whether the deal will hold up based on legal precedent.

Immediately, I think back to the case of American Needle, Inc. v. National Football League. The NFL did not only suffer a loss in the Federal Supreme Court, it was a unanimous loss (9-0). The basic holding was that the NFL is not recognized as a single-entity. Instead, for antitrust purposes, it is made up of thirty-two separate teams, all with separate motives and interests for their licensing of intellectual property, even though they all obviously share an interest in the long-term success of the NFL.

The NFL’s new contract with Nike is a licensing contract. Unless American Needle and the NFL eventually settle out of court, which would remove the precedent already created by the legal battle between the two entities in the past, the NFL’s agreement with Nike may not be etched in stone. The American Needle case was remanded for further proceedings. My guess is that the NFL will not wait long to settle with the company, as I imagine the Nike deal is extremely favorable for the league.

Here is a good quote from Justice Stevens, who delivered the opinion of the Court,

“Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that ‘deprive the marketplace of independent centers of decisionmaking … and therefore of actual or potential competition,’ “

Why shouldn’t the Miami Dolphins be able to wear Nike jerseys while the Atlanta Falcons wear Under Armour uniforms? The NFL and Nike may not admit they are concerned about the American Needle lawsuit, but unless there is a settlement, I cannot imagine that it is not on executives’ minds. Here is a Q&A between CNBC’s Darren Rovell and Nike Brand President Charlie Denson:

Darren: Do you think the American Needle case could possibly negate this deal?

Denson: We’ve watched that case with great interest and at this point in time we’re not taking it into specific consideration. We’ve entered into this deal that starts in 2012 and hopefully by that time it will be resolved and we’ll be able to go full speed ahead.

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Yeah, I think trying to get all the NFL teams on board with something like really would be like trying to corral a group of cats.

DaveM

I don’t think Nike is too concerned about the American Needle lawsuit at this time. If the existing deal blows apart, Nike will simply sign individual team deals with the 10-15 NFL teams that matter (the ones that best promote the Nike brand and have the best chance at retail) – Steelers, Jets, Patriots, Colts, Dolphins, Redskins, Bears, Green Bay, Raiders, Giants, etc.

The remaining teams – Carolina, KC, Jacksonville, Bills, Rams, Titans, etc. will end up going to Under Armour, Reebok or Adidas.

Ultimately Nike will have the best teams and will cost them less money.